It was hardly surprising to read that Volkswagen is to pull its luxury saloon/sedan from the US market. Pitiful sales figures are a clear sign from consumers that the Phaeton is just too much car for the nameplate. And VW’s failure to understand its own brand is truly astonishing.
It’s a lesson the firm should have learned with the Passat W8. While a nice enough car, it too had difficulty attracting interest at a premium price point. Unlike other European brands (BMW, Mercedes, Jaguar, Audi) which have been able to charge higher prices for their 8-cylinder cars, VW’s position as Audi’s lesser brand seems to have placed a ceiling on what it can charge.
It’s hard to understand why VW would push itself towards an area of the market where there are much fewer car sales. Instead of embracing two-tier branding (i.e. Toyota/Lexus, Nissan/Infiniti), VW has pushed to compete with its higher-priced sibling. This has created confusion in the US marketplace as to what the brand stands for. Ideally, it should be value-priced German engineering. Indeed, as the only moderately priced full-line European brand, VW is looking at a segment it could call its own.
In car-mad America, finding a niche like this is a rare and valuable prize. All the other European makers present in the US market are positioned as luxury brands and, unlike in their home markets, have generally preferred not to offer smaller models. With a strong reputation, low price point and no direct competition, this is an opportunity VW should leap upon.
Maybe it already has. Take this except from a recent article in The Scotsman: The withdrawal of Phaeton, which everybody outside VW Group's close-knit product-planning committee knew would fail, may be an indication that common sense is starting to return to Wolfsburg. Wolfgang Bernard, head of VW worldwide, and Adrian Hallmark, the newly appointed executive vice-president of VW America (ironically sent there last month from Bentley) have taken stock. They have finally admitted: "We are a volume producer; let's go in this direction, beginning with the US market, where we are losing a lot of money.”
If a mass market strategy in the US can work for VW, there’s theoretically no reason why it couldn’t for other European marques. The problem has been that, away from the premium brands, no maker has ever produced a model range that has lasting appeal for US consumers. Alfa Romeo, Rover, Peugeot, Renault and Citroën have all tried, but any successes have generally been short lived and none remain there today. The exceptions that prove the rule are Volvo and Saab. Now under US ownership, these too are developing as luxury brands.
Yet, if VW can make a play of the niche it should rightly inhabit, others European brands could follow. SwelledHead’s money is on Peugeot. From the 307 upwards, the proportions and style of the range is largely appropriate. In fact, the new 407 Coupé looks almost made for the US. It goes without saying that large 6 or 8-cylinder petrol/gasoline engines would be expected, but with a strong diesel engine range Peugeot could gain additional success by defining itself as the environmentalists’ choice. Diesel fuel is becoming more popular in the US as it shakes off its penny-pinching image and sells itself on politically correct green(er) credentials.
Gaining traction in what is a fiercely competitive sector is undeniably a major challenge, but with GM and Ford both struggling the US automotive is witnessing some major changes. Toyota and Honda have gained massively more share and other Japanese and Korean brands are echoing this success. Most European brands remain irrelevant to the US, but with the right marketing Peugeot could join VW to share in a niche that marques from other continents cannot occupy.
